AICPA Comments on Tax Provisions in Senate Reconciliation Legislation
Washington, D.C. (August 5, 2022) – The American Institute of CPAs (AICPA) submitted a letter to Senate Finance Committee and House Ways and Means Committee leadership regarding tax policy issues in the Senate reconciliation legislation released July 27 (the Inflation Reduction Act of 2022). The letter highlights some of the key issues the AICPA has identified, including with regard to:
Sec. 10101. Corporate Alternative Minimum Tax
Sec. 10201. Modification of Rules for Partnership Interests Held in Connection with the Performance of Services (Carried Interest)
Sec. 10301. Enhancement of Internal Revenue Service Resources
Corporate Alternative Minimum Tax
The AICPA believes that the Corporate Alternative Minimum Tax proposal contained in Section 10101 violates numerous elements of good tax policy and may result in unintended consequences that must be carefully considered. Imposing tax according to financial statement income takes the definition of taxable income out of Congress’ hands and puts it into the hands of industry regulators and others. Among the many key conceptual differences between financial income and taxable income is the concept of materiality. Public policy taxation goals should not have a role in influencing accounting standards or the resulting financial reporting.
However, if the tax is enacted, the AICPA recommends that the effective date is delayed until after the later of taxable years beginning after December 31, 2023, or the date Treasury issues proposed regulations to provide taxpayers with the needed time to fully analyze and comply.
Modification of Rules for Partnership Interests Held in Connection with the Performance of Services (Carried Interest)
While the AICPA is not taking a position on the adoption of the modification of the carried interest rules in Section 10201, should Congress move forward with the carried interest changes, we suggest several technical clarifications or modifications. The suggested changes are outlined in the letter.
Enhancement of Internal Revenue Service Resources
The AICPA has concerns regarding the sufficiency of the funds allocated for taxpayer services as outlined by Section 10301 of the reconciliation legislation. The AICPA believes that the Internal Revenue Service (IRS) should be funded at necessary levels to allow it to handle all the duties required of it by Congress, including properly administering and enforcing our nation’s tax laws as well as providing needed assistance to taxpayers and their advisors in a timely and professional manner. However, the AICPA also believes that enforcement actions must be in balance with the services the IRS provides to taxpayers. Given the historic low levels of IRS taxpayer services, the AICPA is concerned about a possible imbalance between the funding for taxpayer services and enforcement.
In its letter, the AICPA urges Congress to commit, in a bipartisan manner, to determine the appropriate level of service necessary for the IRS and provide adequate resources for the agency to meet those goals – either as part of a reconciliation package or in a separate vehicle.
“The AICPA is committed to the administrability of our tax system and to exposing the challenges to Congress and the IRS,” said Vice President of Tax Policy and Advocacy for the AICPA, Edward Karl, CPA, CGMA. “The proposed tax provisions in the reconciliation legislation require further consideration and alterations, and we encourage Congress to thoughtfully consider our comments on this.”
Contact: Veronica L. Vera